Hey, guys, it's Ginny Silver, and today I want to talk to
those of you who are gig workers.
If you drive for Uber Lyft door dash.
If you work and earn money or plan to do so in the gig economy,
there's a lot of very important information that you need
to hear that most aren't going to tell you this is extremely
important. So if you plan on participating in the gate economy
and earning money that way, I want you to watch this video
from start to finish, because there's a lot of information
in here that is really important to know that isn't shared
everywhere. The first thing that I want you to understand
is that you're going to be a self employed individual.
Well, you might already know that, but the important thing
here is that you are going to be required to file self employment
income taxes regardless of if your platform sends you a 1099
form, you are required to file self employed income taxes.
If you earn over $400, anything below $400 is technically
a hobby in the eyes of the IRS, but if it reaches $400 and
goes beyond, you are required to claim it on your income
taxes. Now, many low income individuals may think that they
do not have to file income taxes because they fall below
the IRS minimum threshold for requiring a tax return.
Well, that does not apply to self employed income with self
employment income.
The IRS States that you must file a tax return if you earn
over $400 in a year.
The next thing that you need to know is that this applies
regardless of whether or not your platform sends you a 1099.
Now, for companies such as Uber and Lyft, they are going
to be sending you out a 1099K, but they don't send out a
1099K to everyone.
In order to receive this tax form, your gross payments must
have exceeded $20,000 from the company, and you must have
had more than 200 such transactions.
Now, that is a large number.
So there's a big gap here between your filing requirement
threshold, which is $400 and that $20,000 Mark, which is
going to mean that they send you a tax form in the form of
a 1099K.
Now, that is a large number.
So there's a big gap here between your filing requirement
threshold, which is $400 and that $20,000 Mark, which is
going to mean that they send you a tax form in the form of
a 1099K.
The next thing I want you to know goes against what many
of the popular YouTube channels will tell you.
Many popular channels will tell you to write off all of the
possible deductions that you can on your tax return to lessen
your tax bill.
Well, unfortunately, this is going to have some negative
consequences as a result.
So you're going to need to weigh based on your own unique
situation if it makes sense for you to actually claim all
of those deductions.
Now, the first thing I want you to know about writing off
all of your income through tax deductions is that you're
going to have a very low net income and in some cases zero
dollar net income or even negative.
This can have an adverse effect on you if you are trying
to apply for different things such as loans, financing, apartments,
mortgages, et cetera.
Now, writing off all these tax deductions not only has an
immediate consequence on lowering your net income, but it
also can affect you for three years, or someone who is going
to apply for purchasing a home later on down the line, mortgage
companies and financing applications are going to look at
three year averages of your self employment income.
This is something that you definitely want to keep in mind
when it comes to tax write offs.
If you're someone that has plans or hopes to buy a home later
on down the line after taxes, the next thing that I want
you to take into consideration is how your finances are set
up. As a self employed individual, you're going to have to
have a careful way to account for all of your business deductions,
expenses and income.
Now I recommend opening up two completely separate accounts
from your regular personal accounts.
These can also be personal checking and savings accounts.
They don't have to be business accounts because most likely
as a gig worker, you do not hold a business license, but
open up two additional personal accounts.
One is going to be checking and one is going to be savings.
The savings account is going to be for setting aside your
estimated amount that you're going to owe for income taxes.
Self Employment Taxes at the end of the year.
We'll talk about that more in detail later on.
The other account is going to be a checking account and this
is where you will receive your payments from your gig work
as well as pay for any business related expenses only.
Use those two accounts for your work and don't combine them
with personal bank accounts.
This way at the end of the year, your finances are completely
separate. All of your income and deductions are all very
easily accessible through these bank accounts.
Next, let's talk about taxes.
This is extremely important and probably the section of this
video that you want to skip over the most, but it's so important
you guys.
So please watch this whole thing so that you don't get yourself
into a bad situation.
Now, as a self employed individual, you're going to be subject
to paying self employment tax come tax time in April.
Selfemployment tax is 15.3%, which equals Social Security
and Medicare tax.
In addition to that 15.3%, you are also going to be required
to pay regular federal taxes and state taxes.
As a generalization, it's usually a good idea to estimate
at least 30% of all of your income to be set aside for taxes.
Many people wonder if they should estimate this based on
their net income or their gross income.
Gross income is the total amount of income that you receive,
and net income is how much you actually keep.
Once you account for your deductions, you are going to be
taxed on your net income.
However, as a safety net, I strongly recommend setting aside
30% from your gross earnings because it is the absolute worst
to be unprepared for income taxes.
Self employed income taxes can be quite a shock, especially
if it is your first year being selfemployed, which brings
me to my next point that when income taxes are due, if you
owed over $1,000 in federal income taxes, you are not only
going to be required to pay that year's owed balance in taxes,
but you are also going to then be required to pay first quarter
estimated taxes along with that tax filing.
This is an additional expense that many people don't realize
is coming and can be hard to plan for.
Now, if you earn over $1,000 in that tax year, the IRS then
wants you to pay out an estimated amount of what it thinks
you will owe next year.
This is done on a quarterly basis, so that means that the
IRS takes what they think you will owe, breaks it down into
four separate quarters and have you pay off one of those
payments every quarter.
The first of these payments is due right along when you file
your income taxes.
This can be a big blow if you are not expecting that additional
amount due in taxes, which brings me to my next point, which
is what happens if it is tax time.
If you have a larger than anticipated tax bill and you do
not have the money to pay it, the IRS does allow you to request
a payment plan wherein you can ask the IRS to take what you
owe and break it out into a series of payments throughout
a certain time span.
Now this has a few benefits.
Not only does it give you additional time, but if you request
a payment plan, as opposed to simply not paying your balance
and waiting to pay it off, the IRS reduces the amount of
penalties that it assesses to that late tax payment.
So for those of you who work or plan to work in the gig economy,
let me know in the comments down below.
Did you already know all of this information or is it new?
Okay, you guys, I hope that was helpful.
Please click like subscribe and leave me a comment down below.
Going to be working in the gig economy for going to be a
drive share writer a drive share writer.
That's the opposite.
Tracking everything down below.
Did you already know all of this information?
Work in the Gig economy?
Know what this is.